Medulloblastoma, the most common pediatric brain tumor, is thought to arise from deregulated proliferation of cerebellar granule precursor CGP cells. Sonic hedgehog Shh is the primary mitogen that regulates proliferation of CGP cells during the early stages of postnatal cerebellum development. Aberrant activation of Shh signaling during this time has been associated with hyperplasia of CGP cells and eventually may lead to the development of medulloblastoma. The molecular targets of Shh signaling involved in medulloblastoma formation are still not well-understood. Here, we show that Shh regulates sustained activation of histone deacetylases HDACs and that this activity is required for continued proliferation of CGP cells. Suppression of HDAC activity not only blocked the Shh-induced CGP proliferation in primary cell cultures, but also ameliorated aberrant CGP proliferation at the external germinal layer EGL in a medulloblastoma mouse model. Increased levels of mRNA and protein of several HDAC family members were found in medulloblastoma compared to wild type cerebellum suggesting that HDAC activity is required for the survival-progression of tumor cells. The identification of a role of HDACs in the early steps of medulloblastoma formation suggests there may be a therapeutic potential for HDAC inhibitors in this disease.